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MDVN's Xtandi Off to a Strong Start

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Medivation Inc. (MDVN - Analyst Report) reported a third quarter loss of 6 cents per share, narrower than the Zacks Consensus Estimate of a loss of 9 cents per share and the year-ago loss of 14 cents per share.

Revenues came in at $64.8 million, well above the Zacks Consensus Estimate of $49 million and the year-ago revenues of $14.9 million.

The Quarter in Detail

Third quarter 2012 revenues included US Xtandi sales of $7.1 million and collaboration revenue of $57.7 million from partner Astellas and former partner Pfizer (PFE - Analyst Report).

Revenues included milestone payments of $45 million from Astellas based on the FDA's acceptance and approval of the Xtandi New Drug Application (NDA) and the acceptance of the Xtandi marketing authorization application (MAA) in the EU for review.

Xtandi, which was launched on September 13, delivered net sales of $14.1 million. Xtandi is approved for the treatment of patients with metastatic castration-resistant prostate cancer who have previously received docetaxel.

Operating expenses increased 143.9% to $64.4 million. Research and development expenses increased 318.8% to $32.0 million. SG&A expenses increased 71.3% to $32.3 million.

2012 Outlook

Medivation now expects operating expenses (after adjusting cost-sharing payments from Astellas) in the range of $205 - $215 million, up from the previous guidance of $183 - $198 million. Higher royalty expense and non-cash stock-based compensation costs led to the upward revision in operating expense guidance.

Medivation expects capex of about $15 million, especially connected with its new headquarters.

Meanwhile, Medivation is evaluating Xtandi in the pre-chemo setting which represents huge commercial opportunity. Besides conducting the phase III PREVAIL study (chemotherapy-naïve advanced prostate cancer patients), Xtandi is in a phase II study (TERRAIN), which will compare Xtandi with bicalutamide, in advanced prostate cancer patients who have progressed following medical castration with LHRH analog therapy or surgical castration.

Another study (STRIVE) is being conducted mainly in the US in patients with either metastatic or non-metastatic disease. A third study (ASPIRE) is being conducted in chemo-naïve patients. Medivation is also evaluating Xtandi at the earliest stage of prostate cancer, when the disease is initially diagnosed. Medivation is enrolling patients in an open-label clinical trial which will study Xtandi as a new adjuvant therapy prior to prostatectomy. Medivation is also exploring Xtandi for breast cancer (phase I).

Xtandi, which was launched in the US in September, is off to a strong start. The product could very well be a game-changer for Medivation. The prostate cancer market represents huge commercial potential. Medivation has consistently presented impressive data on Xtandi. Based on the data we have seen so far, we believe the product has blockbuster potential. We expect investor focus to remain on the commercialization of Xtandi.

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